IN THIS ISSUE:

Latest Economic Surveys:

Economic Optimism Surveys, Hunger and Employment Surveys

State of the National Economy:

Inflation, Foreign Trade Export & Imports, Foreign Direct
Investments, and Foreign Portfolio Investments

Recent Economic Studies:

Business & Consumer Expectations Survey, Outlook
and Recommendations

economic
snapshots
QUICK FACTS AND FIGURES OF THE PHILIPPINE ECONOMY

QUARTERLY
 CURRENT
ECONOMIC
SITUATION
This issue will include the countrys most recent data on Gross Domestic Product, Foreign Direct
Investments and Remittances, among others. In addition, surveys and studies on the economic
performance and financial forecasts for the Philippines are also offered in this report.
2 2nd QUARTER ECONOMIC SNAPSHOTS
ECONOMIC PERFORMANCE OF THE PHILIPPINES
Figure 1: Gross Domestic Product Growth Rates
Below are the findings on the economic performance (2012 2014)
of the Philippines by the National Statistical Coordination 10.0
Board, the National Economic Development Authority and 7.7
8.0
the International Institute for Management Development.
6.3
6.0 5.7

Highlights of Second Quarter 2014: 4.0

World Economic Forum on East Asia,
First Quarter Economic Growth and 2.0

World Competitiveness Report

Q1 2012-2013 Q4 2012-2013 Q1 2013-2014

The recently conducted World Economic Forum on East

Asia (WEF-EA), which the Philippines hosted for the first
time in WEFs 23 years in the region, was a unique op-
portunity to showcase the countrys resurging economy
amidst external uncertainties in the global economy.
For the First Quarter of 2014, the Philippine economy
grew 5.7 percent, notably lower than the growth rates
of 6.3 percent in the fourth quarter of 2013 and 7.7 per-
cent in the first quarter of that year.1 According to the
National Statistical Coordination Board (NSCB), growth
was mainly driven by the services sector and the industry
sector, which both grew at 6.8 percent and 5.5 percent,
respectively.
Official statement from the governments economic
cluster explains that the relatively slow growth is expect-
Source: NSCB2
ed, given the magnitude of the destruction of
natural disasters that struck the country last
year. Nonetheless, the government, along with
some economists, is still optimistic of attaining
its growth target of 6.5 to 7.5 for 2014.
The Philippine Government attributes this
sustained economic growth to the good gov-
ernance reforms under the Aquino adminis-
tration. This growth was maintained together
with low inflation at 4.1 percent at the end of
this years First Quarter. This, according to re-
ports, is an uncommon situation which puts
the country at an advantage. On the fiscal side
moreover, government expenditures have in-
creased, supported by reportedly improving
revenue collections.
However, it seems that the Philippines lost
some of its momentum when it dropped by
four notches to 42nd rank in the 2014 World
Competitiveness Yearbook (WCY), an annual
country and regional competitiveness report
produced by the World Competitiveness Cen-
ter of the International Institute for Manage-
ment Development (IMD). The Philippines, ac-
cording to the the Executive Opinion Survey of
the WCY report, fared well mainly in terms of

ECONOMIC SNAPSHOTS 2nd QUARTER 3

 the following indicators: the countrys skilled workforce; high educational level; dynamism of the economy; Unemployment and underemployment:
cost competitiveness; and open and positive attitudes.3 The survey was conducted among international ex- Rates are one of the highest in the ASEAN;
ecutives selecting the countrys key attractiveness factors.
Undeveloped financial system: Access to fi-
However, five critical challenges pulled down the countrys competitiveness, namely: infrastructure, corrup- nance is one of the greatest challenges facing
tion, unemployment and underemployment, undeveloped financial system and natural disasters. small and medium firms;

Natural disasters: Typhoons, rains, and earth-

In reference to the report, IMD points out the following:
quake caused major damage in 2013.4

Infrastructure: Many roads are unpaved, public transportation is inefficient, and the primary airport is
operating beyond capacity;
Furthermore on the Executive Opinion Survey,
Corruption: Improvements in governance are being made but still a long way to go; competency of government; competitive tax re-
gime; effective legal environment; reliable infrastruc-
ture; and strong research and development culture
Figure 2: WCY Scoreboard for the Philippines were ranked lowest. Not to mention, government,
(2009 2014) on the back of a robust economy, is yet to achieve
its overarching vision of an inclusive growth.

As mentioned above, the government remains

confident and committed that the economy will
continue to grow at an increasing pace in the suc-
ceeding three quarters5 despite these challenges.
Strong consumer spending, remittance inflows and
IT-Business Process Outsourcing are still perceived to
drive growth, along with other possible growth driv-
ers. According to National Economic Development
Authoritys Arsenio Balisacan, there is still much to
do to achieve its targets, such as diversifying the
economy, developing resiliency and maximizing
benefits from the improving global economy6.

4 2nd QUARTER ECONOMIC SNAPSHOTS

 The WEF-EA was an opportunity for the Philippines to showcase its stellar econom-
ic growth. WEF Founder and Executive Chairman Klaus Schwab said that he was im-
pressed with the Philippines development, with what has been achieved and what will
be achieved.7

Likewise, it was also a venue to announce to the international community that the
Philippines is ready and ripe for business with the high confidence in government; and
positive outlook on the Philippine economy. For ASEAN leaders, the Philippines is defi-
nitely on the right track on its governance and economic agenda but emphasizes that
more can be done. Indonesian President Susilo Bambang Yudhoyono, himself said that
this was a vote of confidence for this countrys remarkable economic achievements.8

And as for WEF Southeast Asia head Sushant Palakurthi Rao, this is the right moment
to shine the spotlight on a country which has turned itself around remarkably after years
of unfulfilled promise9. Endorsing the Philippines economic credentials, he attributed
these to policies promoting good governance that have been implemented by the cur-
rent administration.

For the Philippines and the rest of the ASEAN, the Forum was another chance to reiter-
ate their resolve to implement policy reforms that encourage more inclusive and more
sustainable economic growth; and that support a more climate-resilient society and a
more attractive business environment.

Finance Secretary Cesar Purisima expects that the WEF discussions will yield increased
investment and interest in the Philippines, especially given the Administrations gover-
nance agenda to build a better business climate. However, beyond improving investor
perception, more institutional reforms can still be undertaken to increase investments
and interest in the country. For Manuel Pangilinan, chair of the Philippine Long Distance
Telephone Company and Metro Pacific Investments Corporation, this means addressing
growth constraints such as infrastructure and power two vital things needed to im-
prove the ease and lower the cost of doing business in the country.10

ECONOMIC SNAPSHOTS 2nd QUARTER 5

 ECONOMIC INDICATORS
Figure 3: Quarterly Headline Inflation
Discussed in detail below are some of the key economic in- (2009 - 2014)
dicators that serve as statistics of the countrys economy.

Inflation
For the First Quarter of 2014, the countrys headline inflation
rate increased to 4.1 percent from 3.4 percent in the previous
quarter. The Bangko Sentral ng Pilipinas (BSP) reports that this
could be attributed to increasing prices of most food com-
modities, higher electricity rates and domestic petroleum
prices.

Inflation further rose to 4.5 percent in May 2014 from 4.1

percent in April, but still within the BSPs forecast range of 3.9-
Source: BSP11
4.7 percent for the month.12 And according to BSPs recent
survey of private sector economists, higher inflation rates were
forecasted. But this, according to the report was still broadly
within-target inflation forecasts for 2014-2015.13 Figure 4: Philippine Trade Performance
(March 2013and 2014)

Foreign Trade: Exports and Imports

A lower trade deficit was recorded in March 2014 at $146
million compared to the $253 million deficit in the same peri-
od last year.14 According to the National Statistics Office (NSO),
both export and import earnings increased by 11.2 percent to
$5.227 billion and 9.6 percent to $5.425 billion, respectively.

The positive growth of exports was due to the increase of

exporting seven major commodities, namely: bananas (fresh);
machinery and transport equipment; ignition wiring set and
other wiring sets used in vehicles, aircrafts and ships; other
mineral products; woodcrafts and furniture; electronic prod-
Source:NSCB15
ucts; and articles of apparel and clothing accessories. 16

6 2nd QUARTER ECONOMIC SNAPSHOTS

Foreign Direct Investments Majority of registered investments, according to
the BSP, were directed towards property compa-
In February 2014, BSP records show that the countrys foreign direct investments (FDI) at US$350 million, nies; banks; holding firms; food, beverage and to-
lower by 59 percent relative to the level recorded in the same period last year.17 Recorded net inflows for bacco firms; and telecommunication companies.20
January February 2014 simultaneously decreased by 24.7 percent at US$1.4 billion.

The bulk of FDI for February 2014 came largely from the United States, Japan, Singapore, Germany and Remittances
Hong Kong and were invested mainly to financial and insurance activities; real estate; transportation and
storage; manufacturing; and mining and quarrying activities.19 Cash remittances expanded by 5.2 percent to
US$1.9 billion in April 2014 as demand for skilled
Filipino manpower is sustained. Meanwhile, BSP
Foreign Portfolio Investments records reveal that First Quarter remittances also
reached US$5.5 billion, 6 percent higher than in the
BSP data show foreign portfolio investments (FPI) registering US$2 billion for May 2014. Net inflows im- same period in 2013.
proved by 5 percent with a total of US$545 million, compared to last months net inflows of US$325 million.
Substantial sources of cash remittances were the
Figure 5: Foreign Direct Investments in the Philippines United States, Saudi Arabia, the United Arab Emir-
(January 2013-February 2014) ates, the United Kingdom, Singapore, Japan, and
Hong Kong. 21

Budget Surplus and Government Debt

The Department of Finance (DOF) reports a

record-high surplus at P80.9 billion in April 2014.
Based on recent data, this trimmed the govern-
ments deficit since January to only P3.3 billion, sig-
nificantly lower than last years P29.7-billion short-
fall.22 Such lower deficit, according to the DOF, was
despite a shortfall in the collection targets of both
the Bureau of Internal Revenue (BIR) and the Bureau
Source:BSP18
of Customs (BOC) in April 2014.

ECONOMIC SNAPSHOTS 2nd QUARTER 7

 Meanwhile, outstanding debt of government rose
Figure 6: National Government Outstanding Debt by 0.2 percent to P5.6 trillion as of the end of April
(2000 2013) 2014, but slower than the 6.57-percent increase in
March.23

Despite falling short of spending goals, DOF Sec-

retary Cesar V. Purisima remained confident that
the surplus in April gave the government more
room to boost spending in the coming months to
boost economic growth. 25

ECONOMIC SURVEYS

Below are surveys from the Social Weather Sta-

tions (SWS) which cover the governments eco-
Source: Bureau of Treasury24 nomic and social targets such as employment and
hunger; and personal and economic optimism.

Figure 7:SWS Joblessness Rate and NSO Unemployment Rate in the Philippines
(September 1993 March 2014) First Quarter 2014 Social Weather Survey
on Employment

Latest SWS survey on employment shows that

adult joblessness for the First Quarter 2014 was at
25.7 percent or an estimate of 11.5 million adults.
According to the SWS, this was a deceleration of 1.8
points below the 27.5 percent recorded in Decem-
ber 2013.

By age group, adult joblessness fell by 8.9 points

among 18-24 (youth), 2.6 points among those aged
25-34, 1.2 points among those aged 45 and above;
while up by 0.5 points among those aged 35-44.
Source: SWS26

8 2nd QUARTER ECONOMIC SNAPSHOTS

 Figure 8: Degree of Hunger in Households in the Philippines
First Quarter 2014 Social Weather Survey (July 1998 to March 2014)
on Hunger

Another SWS survey, now on hunger, reports that

approximately 17.8 percent or 3.9 million Filipino
families are experiencing hunger for the First Quar-
ter of 2014. This figure is said to be marginally lower
than the 18.1 percent in December 2013.27

Regionally, according to SWS, hunger went down

to 12 percent, 18 percent and 16.7 percent in Metro
Manila, Mindanao and Visayas, respectively. Howev-
er, hunger worsened by 20 percent in Balance Luzon.
Source: SWS28

First Quarter 2014 Social Weather Survey Figure 9: Expected Change in Quality of Life in Next 12 Months
on Net Personal Optimism and (April 1984 to March 2014)
Net Optimism about the Economy

According to the SWS latest survey, Filipinos were

slightly less positive about their future in the First
Quarter of 2014, compared to last December.

38 percent of the respondents, according to re-

sults, expected the quality of their lives to improve,
while 9 percent said they expect their lives to wors-
en.30 This was relatively lower compared to 41 per-
cent optimists and 8 percent pessimists in Decem-
ber 2013.
Source: SWS29

ECONOMIC SNAPSHOTS 2nd QUARTER 9

 Meanwhile, 28 percent of respondents said they be-
lieve the economy would get better, while 19 percent Figure 10: Expected Change in the Philippine Economy
said it will deteriorate.32 SWS noted that this was slightly (September 1998 March 2014)
better with 30 percent optimistic against 21 percent
pessimistic recorded in December 2013.

Business Expectations Survey

Second Quarter 2014

Latest BSP survey on business expectations reveals

that businesses outlook on the economy was more
bullish in Second Quarter 2014 with overall confidence
index (CI) at 50.7 percent, higher from 37.8 percent in
the last Quarter. And for the Third Quarter 2014, CI is fur-
ther sustained at 48.9 percent. Source: BSP31

On one hand, according to the BSP, the following fac-

tors were cited for the more favorable outlook: (a) robust Figure 11: Overall Business Confidence Index
consumer demand during the secondary harvest sea- (Q1 2001 Q2 2014)
son, graduation and enrollment periods, and summer
season (with the influx of both local and foreign tourists),
(b) new construction projects (public and private) boost-
ed by rehabilitation efforts (from Typhoon Yolanda) and
stepped-up infrastructure projects, (c) increase in orders
and new contracts/projects leading to higher volume of
production, (d) expansion of businesses, launch of new
product lines and rise in investments with the recovery
of the US and other export markets, and (e) continuing
confidence in the administration.34 On the other hand,
major business constraints were identified by respon-
dents being: domestic competition and insufficient de-
mand leading to low sales volume. Source: SWS33

10 2nd QUARTER ECONOMIC SNAPSHOTS

Consumer Expectations Survey Second Quarter 2014

Concurrently, consumer sentiment continued to improve in Second Quarter 2014 as CI increased to -17.3 percent from
-18.8 percent in First Quarter 2014. This, however, is offset by a less upbeat CI of a neutral value of 0 percent and 15.9 per-
cent for Third Quarter 2014 and the entire 2014, respectively.

The factors contributing to this positive outlook, BSP data show, are (a) availability of jobs as well as increase in the num-
ber of employed family members, (b) increasing family income due to higher salary, stronger business activity, and better
harvest, (c) stepped-up road infrastructure projects, (d) more investment prospects in the country, and (e) improvement
of the peace and order situation.36

Figure 12: Overall Consumer Outlook Index

Source: BSP35

ECONOMIC SNAPSHOTS 2nd QUARTER 11

 ECONOMIC STUDIES

According to the NSCB, the Services sector made the highest con-
Figure 13: GDP by Industrial Origin
tribution to the Gross Domestic Product growth in the First Quarter of
2014 with 3.8 percent. This was followed by Industry with 1.8 percent,
and the whole Agriculture sector with 0.1 percent.

Research by the Philippine Institute for Development Studies (PIDS)

has shown that the countrys services sector continue to be the
fastest-growing areas of the economy, particularly Business process
management. In its recent publication on the topic, Formulating the
Philippine Services Strategy for Inclusive Growth, the services sector
is considered to be the major source of GDP growth, contributing to
output and employment in the Philippines. Most importantly, har-
nessing all services will be significant in achieving inclusive growth.

However, PIDS notes that the Philippines has one of the most
restrictive policy regimes for services in the world.38 Based on the
World Banks Services Trade Restrictiveness Index (STRI), a measure
of the restrictiveness of a countrys policy regime based on policy
information alone, the country has one of the most restrictive policy
environments for services. Specifically, constitutional restrictions and
existing anti-competitive business practices in the market under-
mine the countrys competitiveness.

To fully maximize the gains of the booming services sector, PIDS

recommends comprehensive sectoral reforms be undertaken which
not only remove discriminatory measures but also create a pro-com- Source: PIDS37
petition environment.39

12 2nd QUARTER ECONOMIC SNAPSHOTS

ENDNOTES:
1
National Statistical Coordination Board. (May 2014). Philip-
pine economy posts 5.7 percent GDP growth. Retrieved from:
http://www.nscb.gov.ph/sna/2014/1st2014/2014qpr1.asp
2
Ibid.
3
PH slips in IMD World Competitiveness Ranking. (2014, May
22). Rappler. Retrieved from: http://www.rappler.com/business/
economy-watch/58661-ph-slips-imd-world-competitiveness-
ranking
4
Ibid.
5
National Economic Development Authority. (2014, May 29).
Statement of Secretary Arsenio M. Balisacan at the press confer-
ence on the Q1 2014 performance of the Philippine economy.
Retrieved from: http://www.neda.gov.ph/?p=3275
6
Ibid.
7
Cuaresma, B. (2014, May 22). WEF-EA: PHL economic growth
deeply impressive. Business Mirror. Retrieved from: http://www.
businessmirror.com.ph/index.php/en/news/top-news/32560-
wef-ea-phl-economic-growth-deeply-impressive
8
Ibid.
9
Rappler. (2014, May 21). PH takes center stage in World
Economic Forum. Retrieved from: http://www.rappler.com/
business/special-report/world-economic-forum/2014/58551-
philippines-center-stage-world-economic-forum
10
Balea, J. (2014, May 22). How to sustain PH growth? Hard re-
forms needed. Rappler. Retrieved from: http://www.rappler.com/
business/special-report/world-economic-forum/2014/58671-
sustain-ph-growth-hard-reforms-needed
11
Bangko Sentral ng Pilipinas. (April 2014). Inflation report:
First Quarter 2014. Retrieved from: http://www.bsp.gov.ph/
downloads/Publications/2014/IR1qtr_2014.pdf
12
Bangko Sentral ng Pilipinas. (June 2014). Inflation increases
further to 4.5 percent in May. Retrieved from: http://www.bsp.
gov.ph/publications/media.asp?id=3431
13
Ibid.
14
National Statistics Office. (May 2014). External trade perfor-
mance: March 2014. Retrieved from: http://www.census.gov.ph/
content/external-trade-performance-march-2014
15
Ibid. 29
Social Weather Stations. (May 2014). First Quarter 2014 Social
Weather Survey on Net Personal Optimism and Net Optimism
16
Ibid. about the Economy. Retrieved from: http://www.sws.org.ph/
pr20140529.htm
17
Bangko Sentral ng Pilipinas. (May 2014). FDI continue to post
net inflows in February 2014; year-to-date level reaches US$1.4 30
GMA News. (2014, May 26). Pinoys slightly less optimistic
billion. Retrieved from: http://www.bsp.gov.ph/publications/ about the future SWS. Retrieved from: http://www.gmanet-
media.asp?id=3415&yr=2014 work.com/news/story/362648/news/nation/pinoys-slightly-
less-optimistic-about-the-future-sws
18
Ibid.
31
Social Weather Stations. (May 2014). First Quarter 2014 Social
19
Ibid. Weather Survey on Net Personal Optimism and Net Optimism
about the Economy. Retrieved from: http://www.sws.org.ph/
20
Bangko Sentral ng Pilipinas. (June 2014). Foreign portfo- pr20140529.htm
lio investments yield net inflows in May 2014. Retrieved from:
http://www.bsp.gov.ph/publications/media.asp?id=3441 32
Ibid.
21
Bangko Sentral ng Pilipinas. (June 2014). Personal remit- 33
Bangko Sentral ng Pilipinas. (May 2014). Business expecta-
tances rise by 5.2 percent in April 2014; reach US$8.2 billion in tions survey: Second Quarter 2014. Retrieved from: http://www.
January-April. Retrieved from: http://www.bsp.gov.ph/publica- bsp.gov.ph/downloads/Publications/2014/BES_2qtr2014.pdf
tions/media.asp?id=3446
34
Ibid.
22
Montecillo, P. (2014, June 5). Govt posts P80.9B budget
surplus in April. Philippine Daily Inquirer. Retrieved from: http:// 35
Bangko Sentral ng Pilipinas. (June 2014). Consumer expecta-
business.inquirer.net/172174/record-budget-surplus-in-april tions survey: Second Quarter 2014. Retrieved from: http://www.
bsp.gov.ph/downloads/Publications/2014/CES_2qtr2014.pdf
23
Montecillo, P. (2014, June 4). Govt debt rises to P5.64T. Phil-
ippine Daily Inquirer. Retrieved from: http://business.inquirer. 36
Ibid.
net/172118/govt-debt-rises-to-p5-64t
37
Serafica, R. (April 2014). Philippine Institute for Development
24
Bureau of Treasury (2014). National government outstand- Studies. Formulating the Philippine services strategy for inclusive
ing debt. Retrieved from: http://www.treasury.gov.ph/statdata/ growth. Retrieved from: http://dirp3.pids.gov.ph/webportal/
yearly/yr_outstandingdebt.pdf CDN/PUBLICATIONS/pidsdps1422.pdf
25
Montecillo, P. (2014, June 5). Govt posts P80.9B budget 38
Ibid.
surplus in April. Philippine Daily Inquirer. Retrieved from: http://
business.inquirer.net/172174/record-budget-surplus-in-april 39
Ibid.
26
Social Weather Stations. (May 2014). First Quarter 2014 So-
cial Weather Survey on employment. Retrieved from: http://
www.sws.org.ph/pr20140521.htm
27
GMA News. (2014, May 12). 3.9M families say they went hun-
gry in Q1 2014 SWS poll. Retrieved from: http://www.gmanet-
work.com/news/story/360601/news/nation/3-9m-families-say-
they-went-hungry-in-q1-2014-sws-poll
28
Social Weather Stations. (May 2014). First Quarter 2014 So-
cial Weather Survey on hunger. Retrieved from: http://www.sws.
org.ph/pr20140514.htm
ECONOMIC SNAPSHOTS 2nd QUARTER 13

STRATBASE RESEARCH INSTITUTE
9F 6780 Ayala Avenue, Makati City 1200
Vox 632.892.1751 Fax 632.892.1754
www.stratbase.com.ph
STRATBASE Economic Snaphshots
is a quarterly publication that presents the current
economic situation of the Philippines through various
economic indicators as monitored by local and international financial
institutions. This includes the countrys most recent data on Gross
Domestic Product, Foreign Direct Investments and Remittances,
among others. In addition, studies on the economic performance
of and financial forecasts for the Philippines have
been offered in this report.